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Flight to safety: The risks remain the same and there wasn't an event to precipitate yesterday's sell-off. It apparently began in the Asian session, after Chinese equities pared the gains it had added over the previous two trading sessions, then swept through European and North American markets as the day unfolded. Haven assets have caught a bid, the most pertinent of which are US Treasuries and gold (which tested $US1232 resistance once more), while the Yen has experience a broad-based boost from the unwinding of the carry trade, to test the support of a significant medium-term trend line.

US Treasuries: Arguably, the most illuminating asset during overnight trade were US Treasuries, and the activity of its yield. Of course, that should come as no surprises, given the dominant theme in markets is the US Federal Reserve's rate hiking ambitions. The tussle in markets regarding heightened global growth risks and the impacts of higher global rates is manifesting on the hour across the US yield curve. The yields on interest rate sensitive 2 Year Treasury Note jumped to near-decade-long highs during Asian trade yesterday, seemingly inciting a minor panic amongst investors. The shift subsequently looks to have hastened the liquidating of equity positions, driving funds back into bonds, pushing yields down first at the back end of the curve, before driving the front end down with it, as havens have been sought.

Asian equities: The edginess amongst investors played out most acutely in Chinese equity indices, which let go of much of the optimism engendered by policy makers' recent assurances of State-backed support for financial markets. The relatively blue-chip CSI 300 dropped 2.66% for the day, capping off an Asian session in which the Nikkei shed a comparable amount, the Hang Seng lost over 3%, and the ASX 200 dropped over 1%. The downward trend continues for China's markets, which despite exhibiting stronger fundamentals (on paper) than what markets are conveying, can't managed to hold onto a sustained rally. It points to a market that may well believe that the worst impacts of the trade-war are still to play out – that is, that the trade war will transform China's mild economic slowdown into something graver.

ASX 200: The action on China's markets accelerated the momentum of selling on the ASX 200 in yesterday's trading session. However it must be said bearish sentiment had already been pervading the local share market by the time China’s markets opened. SPI Futures have undergone a noteworthy reversal early this morning, indicating currently a 13-point jump at the open today. The shift in price can be attributed to a late run on Wall Street, which has seen US indices bounce off the day's lows to contain the session's losses to about half-a-per-cent. What Wall Street’s lead reveals about what lies ahead for the ASX today is opaque; but considering that yesterday’s activity saw losses across every sector, perhaps simply a general retracement is in store today.

Europe: Europe took the weak Asian lead yesterday and added to it the continent's own idiosyncratic risks. The result was a 1.24% fall in the FTSE 100 and a 2.17% fall in the DAX. Combined with fears about global growth, higher global interest rates, and stalling Brexit negotiations, was another deterioration in the relationship between the Italian Government and European Union bureaucrats, after Brussels threatened Italy with hefty fines if it did not revise its controversial budget in the next three weeks. The spread between German Bunds and Italian BTPs expanded to around 320 basis-points once again, as markets priced in a greater chance of an Italian credit default. Despite this, the GBP and the EUR kept flat for the day, by virtue of a slightly weaker USDUSD, which lost some of its haven bid to gold on the back of investors cutting exposure to fiat currencies.

Wall Street: At Wall Street's close, the major US indices have all closed effectively 0.5% lower for the day. Another poor session undoubtedly, making this the twelfth time in fourteen days that the S&P 500 has registered a loss – however it must be remarked that the result comes after US equites fell by as much as 2% intraday. The overriding theme again for US markets was the building angst regarding the various risks that posed to earnings growth in 2019, especially after Caterpillar Inc (All Sessions) flagged a suggested a crimp to its profits from the expected impacts of the US-China trade war. How this narrative holds will hold increasing weight in the final days of this week, as markets anticipate earnings release from the likes of Microsoft Corp (All Sessions), Amazon.com Inc (All Sessions), and Alphabet Inc - C (All Sessions).

Saudis and Oil: Oil prices experienced some of the highest levels of volatility overnight, as the sinister politics of the black stuff played out in price action. Oil - Brent crude prices dropped by over 4%, breaking its dance with the $US80 per barrel level. A degree of the tumble in prices comes as fears mount about the sustainability of global economic growth. However, the major catalyst for the very acute fall came as Saudi Arabia pledged yesterday to boost oil production, in the face of growing pressure from the global community regarding its (all but proven) murder of dissident journalist Jamal Khashoggi. If last night's move is indeed a turn of trend, time will tell; though it isn't a stretch now to suggest that the Saudi's may look to push oil prices down as an act of recompense to the global community for their heinous behaviour.

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